What your startup needs to know about Angel Investor funding

Is there really heaven on earth? In the startup sequence of a business, the lack of working capital might pose the biggest threat to its development. It is a well-known fact that in the first five years or so of any company, profit might be out of the question. Simply put, it’s survival by excellence. […]
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Many business owners do not agree to that. If you are willing to let an investor play an active role in your company, then funding is an arms reach away.

Moreover, even when the angel investor doesn’t want to become a co-leader, he might still ask you why you’ve taken certain decisions.

2. He might want more than he invested
This is utterly unacceptable, but it doesn’t change the fact that it does happen.

Angel investors are focused on profit. If your business takes off, your investor could try getting his hands on more money than he put into your company, to begin with.

If this happens, you’ll have a problem that you might need to take to the court to solve.

3. Once your company develops, he’ll get some of your earnings
This is one of those strings attached to the investment of the business angel. Again, you don’t need to pay him back in physical money, like you would a loan.

However, some of your money will get to him anyway.

It’s his right as an investor and you can’t stop it. This can slow down the development of your company when you least expect it.

Some Important Precautions

A new growing brand in India MR10 stated in a discussion that “In order to stay away from trouble, you should take some precautionary measures.

For instance, when you first talk to the investor, make sure your business will be as successful as he expects it to. This will shield you from not satisfying him.”

Moreover – and memorize this – do some calculations and see whether or not he’ll get more money than you do at the end of the day, especially if he will have some form of ownership over your company.

Also, do not get funding from an angel investor if you are not down with the idea that he will have a word to say in your company. Most people refuse an angel investor’s help altogether because of this, and honestly, good for them.

Concluding Remarks

Angel investors are quite dyadic investors, in the sense that, on one hand, they provide funding easier than banks do, but on the other hand, their help usually has too many strings attached to be entirely beneficial.

If you cannot get funding from another institution, you are justified to talk to a business angel.

Just make sure you take a look at those precautions again, so you won’t end up regretting your decision.

You should not give up too easily on the importance of your own word because, after all, it’s your company, not the investors.

We hope this cleared out any issues you might’ve had with the feasibility of angel investors.

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